A protocol for speeding up and scaling blockchains
The Lightning Network protocol allows computers to make blockchain transactions while only storing information about their own account balance. Lightning has two key benefits that make it a much more scalable solution than traditional blockchain protocols:
- Much faster confirmation time (thousands or millions of transactions can be made each second as opposed to under 10 per second with Bitcoin)
- Much cheaper (a fraction of a cent per transaction as opposed to 5-10 cents for Bitcoin)
- The building blocks for the Lightning Network are two-party connections called Payment Channels which allow for transactions between the two parties.
- Lightning uses a network of payment channels to allow transactions between two users along a chain of “smart contracts” between network nodes.
- The final transactions are only broadcast to the network once the channel is closed, allowing for many transactions to be processed nearly instantaneously.